MalaysiaMalaysia's Unpaid Loans Hit RM9.27 Billion
Civil society groups call for comprehensive review of unpaid loans, Auditor-General's Report reveals low recovery rate of 5% in 2025. The federal government's debt rose by 5.9% to RM1.321 trillion in 2025.
Global Newsflix 2 min read
The Auditor-General's Report 2/2026 found that the federal government managed to recover only 5%, or RM465 million, of the RM9.27 billion in outstanding loans in 2025. Transparency International Malaysia president Dr Raymon Ram said each significant account should have a clear recovery strategy.
The report also found fresh arrears amounting to RM16.15 million even after the loans had been restructured up to five times. The repayment period for the restructured loans was extended by 10 to 40 years.
Centre to Combat Corruption and Cronyism senior researcher Bryan Cheah stressed the importance of strengthening monitoring and enforcement, tightening risk assessments and re-evaluating the effectiveness of loan restructuring.
Universiti Teknologi Mara economist Dr Mohamad Idham Md Razak said strengthening monitoring and recovery mechanisms must be prioritised much earlier in the lending cycle. He suggested greater use of integrated data systems to identify accounts showing early signs of repayment difficulties.
The Auditor-General's Report recommended legal action against borrowers who default on their loans without reasonable justification. It also recommended stricter financial capacity analyses and risk assessments before approving new loans or restructuring existing ones.
The federal government's subsidy spending fell 40.1% to RM23.43 billion in 2025, mainly due to a drop in petroleum subsidies. Spending on grants and aid for the welfare of individuals and families rose to RM20.36 billion from RM4.24 billion.
Sunway University economics Prof Yeah Kim Leng said low loan repayment impedes the government's ability to extend similar financial aid to a larger pool and leads to deficit spending and higher borrowings.
Key facts
- RM9.27 billion in outstanding loans in 2025
- 5% recovery rate of outstanding loans in 2025
- Federal government's debt rose by 5.9% to RM1.321 trillion in 2025
- Spending on grants and aid for welfare rose to RM20.36 billion in 2025
Three perspectives
Neutral
The Auditor-General's Report has sparked calls for a comprehensive review of unpaid loans. The government's low recovery rate of outstanding loans has raised concerns about its ability to manage debt. The report's findings will likely be closely watched by stakeholders.
Positive
The decrease in subsidy spending and increase in welfare grants suggest the government is taking steps to manage its finances and support those in need. The report's recommendations for stricter risk assessments and loan restructuring may help improve the government's loan recovery rate.
Negative
The low recovery rate of outstanding loans and high amount of unpaid loans are major concerns for the government's financial management. The report's findings suggest a need for more effective monitoring and enforcement mechanisms to prevent defaulters from avoiding repayment.
Your week in news, every Wednesday
The biggest stories of the week for your edition, in your inbox every Wednesday morning, your time. Free, and you can unsubscribe at any time.